Public transport is critical to the health and success of London. And this is a critical moment for the health of public transport.

We have a pioneering Tube system that is about to celebrate its 150th birthday, and which is still the envy of many other capitals.

Our buses are carrying more than two billion passengers a year - the most since the 1960s.

And yet our system is in desperate need of repair. We cannot expect Londoners to put up with ever-more crowded and stifling trains and with the misery and frustration of signal failures.

Every time your train is stuck inexplicably in a tunnel, every time a service is cancelled, the experience is not just eroding your quality of life. It is eating away at our city's global competitiveness.

Every time you inhale the fumes of a heavy, noisy, diesel-fuelled bus you are being exposed to the one of the prime culprits in London's struggle to meet decent air quality standards.

With a population set to grow by 1.3 million over the next 15 years, we cannot just creak along as we are. We cannot submit to an intensifying rhythm of delay and decay.

That is why Transport for London is engaged in the biggest programme of investment of the past 70 years.

We are upgrading eight Tube lines and introducing air-conditioning on 40 per cent of the network.

We are expanding the Docklands Light Railway by 50 per cent, and we are pushing ahead with Crossrail, which will increase London's rail capacity by 10 per cent.

We are continuing to invest in cycling and low-carbon technology for our buses. We are making these investments because they are the bare minimum we need to give London commuters the transport system they deserve and which this city needs to remain economically competitive with other capitals.

And yet TfL is trying to pay for this, while coping with the deepest recession for 30 years. We have seen the biggest fall in Tube ridership since the late 1980s - and though that may not seem to make the Tube less crowded, that fall alone has blown a £700 million hole in the budget.

We are coping with the colossal costs of the failure of Metronet and the disastrous PPP, and we are dealing with the costs of years of irresponsible politically motivated jiggery-pokery in setting fares.

That is why I am announcing these rises today. They give me no pleasure whatever. But I believe passionately that they are reasonable and in the best interests of London.

It is a fares package that has been produced after long consultation, and Londoners should know that it is being accompanied by a sustained and determined assault on costs at Transport for London.

London Underground has already shed 1,000 backroom positions. We have cut £220 million on consultants and £130 million on accommodation costs, as part of a programme that will take £5 billion out of TfL's budget by 2018.

We have taken some very tough decisions to slow down projects such as some station renewals and step-free access because it is there that we can find savings that do not compromise the great prize: to increase capacity, and to allow more people to travel in speed and comfort on public transport.

We have been ruthless in finding savings, and that is why we have been able today to restrict the scale of the fare increases.

These are not the biggest fare hikes of the past 10 years. That dubious honour belongs to the increases of 2005 and 2006.

Even when these rises come into effect, from January, average bus fares will be 10 per cent lower than in 2000, and Tube fares have not kept pace with the rise in earnings.

The simple fact is that in a bitter recession, and with such huge pressure on public finances, we cannot keep providing a service at a price so far below cost.

Bus subsidy has soared from £24 million in 2000 to more than £600 million today.

With almost 40 per cent of bus passengers allowed to travel for free, I have of course been urged to take those benefits away.

I have been told that 60 is too young to have the right to 24-hour free travel. I have been advised that we should take back free travel for kids.

I disagree. I believe those concessions are valued by Londoners of all ages.

Together with our help for those on income support and those in search of work those schemes are especially important now, in a recession, and I will not take them away.

Having cut costs to the bone, having begun the painful process of shedding thousands of employees, we are then faced with a clear choice.

We could flunk the test, and expand the black hole in TfL's finances.

We could cancel vital infrastructure projects and do long-term damage to the prospects of this city. We could impose new charges on the young, the old and those on benefits.

It is obvious that none of those options is right for this city. That is why I am today announcing a package of measures that is fair, that protects the vulnerable, and will allow us to get on with the vital infrastructure investment we need.

London has a fantastic future over the next few years. We are going to harness the Olympics to drive change and improvements of all kinds in what it feels like to live in and move around the city.

But we can only deliver those changes if we now take the steps - too long delayed - to sort out the finances of Transport for London.

We must put those finances on a firm footing, and we must do it now. It is the only way to ensure we can make the investment that London needs in buses, trains, track, tunnels, bridges and signalling.

If we make those investments, we will deliver huge returns in the quality of life in this city.

And if we fail to make them, the long-term cost to Londoners will be infinitely higher than any increase in fares.